The disclosed subject matter relates to a method and system for identifying financial transactions that occur across national and regional borders and processing currency conversion for such financial transactions.
The use of payment devices that are linked to customer accounts (e.g., credit cards, debit cards, charge cards, smart cards, etc.) is commonplace for conducting financial transactions in the modern economy. The payment-by-card industry involves many different entities (e.g., card issuers, merchant acquirers, payment processors, etc.) that perform various tasks for processing payment-by-card transaction data (“transactions”). The various tasks for processing include, for example, handling the information and payment flows needed for converting an electronic record created at the point of sale into cash for the merchant. FIGS. 1A and 1B show an exemplary four-party network involved in processing payment-by-card transactions including transaction authorization, and clearing and settlement. The processing of payment card transaction is subject to industry regulations and national laws designed to protect parties and to appropriately transfer liability, for example, in the case of fraud or chargebacks.
The payment-by-card transactions may involve a buyer from one country (or currency region) and a seller from another country (or currency region). Such “cross-border” transactions may occur in a variety of situations, for example, when a buyer travels abroad and purchases an item from a local merchant, or when a buyer purchases an item on-line from a foreign merchant. Cross-border transactions can also occur in situations not involving a merchant or seller, for example, when a cardholder withdraws money from an automated teller machine (ATM) in a foreign country, or otherwise uses the payment device (e.g., a debit card) to transfer funds across national borders.
International or global payment card processing systems or networks for processing cross-border transactions may be similar to payment card processing systems or networks for processing single currency transactions (see e.g., FIGS. 1A and 1B). However, processing of a cross-border financial transaction generally requires some form of currency conversion because the cardholder's native currency (e.g., the designated currency in which the associated payment account is held) will usually not be the same as the currency of payment required by the merchant or seller. Further, each of the countries or regions across whose borders the financial transaction takes place may have different sets of regulations and laws (e.g. foreign currency exchange regulations, chargeback rules, or banking laws) that are applicable to the transaction. A centralized global payment card processing system or network must be able to appropriately identify whether a currency conversion process for a requested payment card transaction is necessary or has already been performed by other parties (e.g., merchants and acquirers) before submission of the requested payment card transaction for processing. Each of the entities (e.g., banks, merchants, acquirers, card issuers, etc.) involved in processing a “foreign currency” transaction may levy currency-conversion fees for their services in addition to their usual fees for processing “single currency” transactions.
It is noted that, for convenience in description, the singular term “transaction” as used herein may interchangeably refer not only to the use of a payment card by a cardholder (e.g., to make a purchase at a merchant or withdraw cash at an ATM), but also to the subsequent series of transactions between entities in the payment card network (e.g., acquirers, issuers, payment card network, card association, etc.). Further, the singular term “transaction” may also interchangeably refer to the transaction “event,” transaction data and/or transaction messages between the entities in the payment card network and/or other networks (e.g., banking networks).
Consideration is now being given to ways of enhancing a global payment card processing system to make it responsive to different legal and regulatory environments applicable to cross-border transactions. Further, attention is directed to allocating the costs of maintaining a global payment card processing system infrastructure and the costs of performing cross-border settlement to the various entities. A desirable global payment card processing system will be competitive in the payment-by-card industry with regard to the provision of foreign currency conversion services.